You Are a U

question 81

Multiple Choice

You are a U.S.dollar based corporation with a project in Great Britain that will cost you £1,000,000.The project will provide free cash flow of £500,000 for the next 3 years.If the pound denominated discount rate for this project is 12% and the spot rate is .5600£/$,then what is the dollar denominated NPV for the project? Round to the nearest $10.

• A) $358,780
• B) $200,920
• C) $112,510
• D) none of the above

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Definitions:

Reserve

Assets held back or saved for future use or to meet unforeseen needs, often referring to banks' reserves of cash.

Demand Deposits

Money in bank accounts that can be withdrawn "on demand" without any advance notice.

Junk Bonds

High-yield bonds that carry a higher risk of default compared to investment-grade bonds, typically issued by companies with lower credit ratings.

Real Estate Loans

Loans specifically provided for purchasing property, including both residential and commercial properties.